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No-trade in second-price auctions with entry costs and secret reserve prices

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  • Lovo, Stefano
  • Spaenjers, Christophe

Abstract

We consider a second-price private-value auction in the presence of an exogenous participation cost and a secret reserve price endogenously set by the seller. We show that, if the entry cost is strictly positive, the only equilibrium outcome is that the seller chooses a reserve price that deters entry and no buyer enters.

Suggested Citation

  • Lovo, Stefano & Spaenjers, Christophe, 2017. "No-trade in second-price auctions with entry costs and secret reserve prices," Economics Letters, Elsevier, vol. 156(C), pages 142-144.
    • Handle: RePEc:eee:ecolet:v:156:y:2017:i:c:p:142-144
    DOI: 10.1016/j.econlet.2017.04.022
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    References listed on IDEAS

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    1. Rosar, Frank, 2014. "Secret reserve prices in first-price auctions," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 65-74.
    2. Tan, Guofu & Yilankaya, Okan, 2006. "Equilibria in second price auctions with participation costs," Journal of Economic Theory, Elsevier, vol. 130(1), pages 205-219, September.
    3. Bernard Elyakime & Jean-Jacques Laffont & Patrice Loisel & Quang Vuong, 1994. "First-Price Sealed-Bid Auctions with Secret Reservation Prices," Annals of Economics and Statistics, GENES, issue 34, pages 71-114.
    4. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
    5. Stegeman, Mark, 1996. "Participation Costs and Efficient Auctions," Journal of Economic Theory, Elsevier, vol. 71(1), pages 228-259, October.
    6. Vincent Daniel R., 1995. "Bidding Off the Wall: Why Reserve Prices May Be Kept Secret," Journal of Economic Theory, Elsevier, vol. 65(2), pages 575-584, April.
    7. Philippe Jehiel & Laurent Lamy, 2015. "On absolute auctions and secret reserve prices," RAND Journal of Economics, RAND Corporation, vol. 46(2), pages 241-270, June.
    8. Paulo K. Monteiro & Flavio M. Menezes, 2000. "original papers : Auctions with endogenous participation," Review of Economic Design, Springer;Society for Economic Design, vol. 5(1), pages 71-89.
    9. repec:adr:anecst:y:1994:i:34:p:04 is not listed on IDEAS
    10. Blume, Andreas & Heidhues, Paul, 2004. "All equilibria of the Vickrey auction," Journal of Economic Theory, Elsevier, vol. 114(1), pages 170-177, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Auctions; Entry; Participation costs; Reserve prices; No-trade equilibria;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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